Medicaid a lifeline for the poor and disabled

Before Medicaid was established, low-income Americans had limited access to healthcare, relying heavily on charity care and public hospitals. What access they had came through a patchwork of community and religious organizations targeting the “deserving poor,” defined as sick or disabled children, pregnant women, infants, the blind and the elderly. If an “able-bodied” person needed healthcare, however, they generally were out of luck.

“Before (Medicaid), to be old and poor and sick was to suffer and to die prematurely,” said Trish Riley, executive director of the National Academy for State Health Policy.

The healthcare situation for low-income and disabled Americans improved significantly when President Lyndon Johnson signed legislation establishing Medicaid in 1965. Under the law, the federal government gave states matching funds for every dollar spent on the program. State participation was optional, and it wasn't until 1972 that every state except Arizona had a Medicaid program. Arizona finally implemented Medicaid in 1982.

From the mid-1980s to the early 1990s, Congress incrementally expanded Medicaid eligibility. Lawmakers severed the link between Medicaid and welfare. By the start of the 1990s, all pregnant women, infants and children under age 6 who had family incomes below 133% of the federal poverty level had to be covered by the states. In 1997, Congress approved a separate program, the Children's Health Insurance Program, to expand coverage to children 18 years of age and younger in families with incomes up to 200% of poverty.

Medicaid enrollment reached nearly 40 million by 1993, and there was a push from Washington to find ways to reduce program spending. States began to take advantage of demonstration waivers allowed under Section 1115 of the Social Security Act and shift parts of their Medicaid populations from fee-for-service to managed care. By 1995, roughly one-third of Medicaid recipients, or 11.6 million, were enrolled in managed-care plans, which were designed to cut costs and improve care.

While millions of people got healthcare coverage through Medicaid, up to that point millions of other low-income Americans—mostly non-disabled adults without dependent children—still found themselves with no affordable coverage options. Some states attempted to serve this population through waivers and state programs. Then, in 2010, the Affordable Care Act required states to expand Medicaid to all adults who were U.S. citizens or legal residents with incomes up to 138% of poverty, with an initial 100% federal contribution, eventually phasing down to 90%. There were about 17.1 million uninsured adults in that income range when the law passed, making up 37% of all uninsured Americans.

In 2012, the U.S. Supreme Court ruled that the federal government could not force states to expand Medicaid under the threat of losing all their federal Medicaid funding, making expansion optional. As of May 2015, 29 states and the District of Columbia had voluntarily adopted Medicaid expansion. A number of states with Republican governors or legislatures, including Arkansas, Iowa, Indiana and Michigan, have received Obama administration approval to implement their expansions with conservative-friendly features such as premium contributions from beneficiaries and reliance on private health plans. In the wake of the ACA expansion, the Medicaid program now provides coverage to nearly 70 million low-income and disabled Americans.

For the rest of the Obama administration at least, there will be a continued push from the federal government to persuade the 21 holdout states to expand Medicaid. It's estimated that 4 million more low-income adults could gain coverage if those states expanded their programs. Nearly 2 million of those people are in Florida and Texas. It's likely that future state expansions will incorporate conservative principles of personal responsibility, which experts say will reduce the number of people covered.

But if Republicans win the White House and hold Congress in the 2016 elections, they are likely to push for eliminating Medicaid expansion, cutting Medicaid spending and giving states greater state flexibility in the program.

One area of bipartisan agreement, however, centers on the need for reform in Medicaid's coverage policies for elderly and disabled people who need long-term-care services. There is broad support for shifting more care from institutional settings to home- and community-based settings. Medicaid currently pays for about two-thirds of all long-term nursing home residents' care.

That shift is underway. “We are moving toward serving people based on the best way to serve them as opposed to saying, 'If you need long-term care, you go into a nursing home,' ” said Cindy Mann, who until recently served as the CMS' Medicaid director and is now a partner at the law firm of Manatt, Phelps & Phillips. By the end of 2015, she said, 50% of Medicaid spending on long-term care will go toward community-based care.